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On the limited evidence before us (including petitioners'
and American Silver's written contemporaneous representations as
to the value of the jewelry, the evidence reflected on Al Zuni's
tax returns as to the cost of the jewelry inventory that Khalaf
purchased for Al Zuni in 1990, 1991, and 1992 in the $1 million
plus range and regarding the cost of the jewelry inventory Al
Zuni had on hand at yearend 1990 and 1991 in the one-half million
dollar range), we conclude that the value of the jewelry
inventory transferred to Khalaf on September 15, 1992, was
$671,413.
With regard to Al Zuni’s cost basis in the jewelry inventory
transferred to Khalaf on September 15, 1992, the parties
stipulated that the jewelry inventory had a cost basis to Al Zuni
of $538,000. Subtracting the $538,000 cost from the $671,413
value of the jewelry inventory transferred from Al Zuni to Khalaf
produces income to Al Zuni of $133,413.
Petitioners contend that certain checks totaling $133,000
written during 1992 by Khalaf on Al Zuni’s bank account in favor
of Khalaf, Khalaf’s daughter and son, and cash should be treated
as additional purchases of jewelry on behalf of Al Zuni, and
should be treated as increasing Al Zuni’s cost basis in the
jewelry inventory by at least $133,000 and as eliminating
essentially all gain on the transfer of the jewelry inventory to
Khalaf. No credible evidence indicates that these checks
constitute purchases of jewelry inventory. Petitioners' attempt
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